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New Plays, Tuesday, 03/06/2007

New Option Plays

by OI Staff

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NBL

Play Editor's Note: Market internals for Tuesday's market-wide bounce were pretty good. However, sentiment still seems shaky and we remain very skeptical of the rebound. However, if the market does continue to bounce we want a part of the move so we're listing a couple bullish positions. Traders should be very cautious about adding new bullish positions since many believe the worst may not be over for stocks.

New Calls

ESSEX Prop. - ESS - cls: 129.08 chg: +2.96 stop: 125.95

Company Description:Essex Property Trust, Inc., located in Palo Alto, California, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast communities. Essex currently has ownership interests in 129 multifamily properties (26,866 units), and has 908 units in various stages of development. (source: company press release or website)

Why We Like It:The REITs have been getting killed in the last two weeks. The market sell-off has pulled many of them well off their recent, record highs. ESS might be a bullish candidate given today's bounce from support near $125(126) and its rising 200-dma. Volume on ESS' bounce today was more than five times the norm, suggesting this could be a pivotal turnaround point. Most quote services will list the intraday high as $132.19. That looks like a bad tick to us. A glance at the intraday chart shows that ESS didn't trade over $130 today, which looks like short-term resistance. We are suggesting a trigger to buy calls at $130.26. If triggered our target is the $$137.00-140.00 range, which is where ESS will encounter its 50-dma again. FYI: ESS will present on Wednesday March 7th at the Citigroup global property conference.

Suggested Options:We are suggesting the April calls. The prices quoted (from the CBOE) below do not look current.

Company Description:Noble Energy is one of the nation's leading independent energy companies and operates throughout major basins in the United States. (source: company press release or website)

Why We Like It:NBL looks like an attractive call candidate. Throughout the market's recent weakness the stock held up relatively well and volume came in very strong as bulls continued to buy the dips near $56.00. Today's bounce back above its simple 10-dma looks like a new entry point to jump on the current (bullish) band wagon for NBL. We're going to stock our stop loss at $55.75, which is under the lows for the last couple of weeks. More aggressive traders may want to put their stops under $55.00. We do expect some resistance near $60.00 but our target is the $62.00-62.50 range.